Question

97. Eff Ltd. was organized on January 2, 2017, with 100,000 no par value common shares authorized. During 2017, Eff had the following capital transactions:

Jan 5Issued 75,000 shares at $14 per share

Jul 27Purchased and retired 5,000 shares at $10 per share

Nov 25Issued 4,000 shares at $13 per share

What would be the balance in the Contributed Surplus account at December 31, 2017?

a) $ 0

b) $10,000

c) $20,000

d) $50,000

98. At December 31, 2016 and 2017, Gee Corp. had outstanding 3,000 no par value, $8, cumulative preferred shares and 10,000 no par value common shares. At December 31, 2016, dividends in arrears on the preferred shares were $12,000. Cash dividends declared in 2017 totalled $45,000.What amounts were payable on each class of shares?

Preferred SharesCommon Shares

a) $24,000$21,000

b) $33,000$12,000

c) $36,000$9,000

d) $45,000$0

99. Eye Corp. owned 20,000 shares of Lash Corp., which had been purchased in 2013 for $300,000. On December 15, 2017, Eye declared a property dividend of all of its Lash Corp. shares. The property dividend was distributed on January 15, 2018. On the declaration date, the fair value of Eye’s investment in Lash was $400,000. The entry to record the declaration of the dividend would include a debit to Retained Earnings of

a) $0.

b) $100,000.

c) $300,000.

d) $400,000.

100.Presented below is information related to Madrid Corporation:

Subscriptions Receivable, Common Shares.................$ 120,000

Common Shares, no par value............................3,810,000

Common Shares Subscribed.............................240,000

$4 Preferred Shares, no par value.........................1,440,000

Retained Earnings.....................................900,000

The total shareholders' equity of Madrid Corporation is

a) $6,270,000.

b) $6,300,000.

c) $6,390,000.

d) $6,510,000.

Answer 1

97.

balance in the Contributed Surplus account at December 31, 2017 = shares retired * difference in price

balance in the Contributed Surplus account at December 31, 2017 = 5000 * (14 - 10)

balance in the Contributed Surplus account at December 31, 2017 = 5000 * 4

balance in the Contributed Surplus account at December 31, 2017 = $20000

Correct answer is c.

.

98.

Preferred shares = Current year dividend + dividend in arrears

Preferred shares = (3000 * 8) + 12000

Preferred shares = $36000

.

Common shares = total dividends - dividend on Preferred shares

Common shares = 45000 - 36000

Common shares = $9000.

.

99.

The entry to record the declaration of the dividend would include a debit to retained earnings of $400000 i.e. the fair value of the investment.

Investments are recorded at fair value. If the fair value is less than the book value then the value of investment is reduced for the current year.

Correct answer is d.

.

100.

total shareholders' equity = common shares (no par + subscribed) + preferred shares + retained earnings - subscription received

total shareholders' equity = 3810000+240000+1440000+900000 - 120000

total shareholders' equity = $6270000

Correct answer is a.